Understanding the Crisis
Thousands of individuals who paid substantial amounts to cover their future funeral costs have found themselves in a difficult situation after an insurer abruptly canceled their policies. This move by Maiden Life has been criticized as ‘immoral’ as customers were informed that their coverage would be terminated at the end of this month.
Many policyholders, especially the elderly and those on low incomes, believed they were contributing to a funeral plan. However, the reality is that the premium was only covering them for one month at a time, with the possibility of cancellation by either party with 30 days’ notice. Maiden Life has now decided to cancel these policies following a review.
Some individuals had been paying into the scheme for decades, expecting a payout of up to £10,000 for their families upon their death. For many, the contributions they made far exceeded any potential payout they might have received.
Ann Sloan, 81, shared her experience of paying thousands in premiums over 16 years “for nothing.” She mentioned that if she had died sooner, her family would have received £6,000, which would have been sufficient for her burial. She also expressed concern about her two disabled sons and a daughter who has had two heart attacks, questioning where they would get the money to bury her.
Sloan added that if she had known it wasn’t a funeral plan, she “would have never taken out that policy.”
The Maiden Life policies were closed to new customers in 2009, but around 2,000 are still active. These policies were sold through an insurance broker, CMutual, and credit unions in Scotland. Credit unions are popular among those who struggle to access mainstream banking, such as individuals with poor credit records.
Paul Sweeney, an MSP in the Scottish Parliament, described the situation as “deeply immoral and repugnant,” leaving vulnerable, low-income elderly people in a difficult position. He emphasized the need for support for these individuals.
Maiden Life is not regulated by the Financial Conduct Authority (FCA), which means it cannot force the firm to continue with the policies or establish a compensation scheme. Its rules only cover pre-payment plans, which allow upfront payments for funeral costs to avoid families footing the bill.
James Daley from consumer group Fairer Finance suggested that the regulator should investigate. He pointed out that customers clearly didn’t understand that the premium was covering them for just one month at a time. If they had understood this, they likely wouldn’t have purchased the policy.
Doug McAllister, Labour MP for West Dunbartonshire, highlighted the impact on the poorest individuals, calling it heartbreaking. He mentioned he had written to City Minister Lucy Rigby to discuss compensation.
A spokesman for the Association of British Credit Unions Limited trade body acknowledged the distress caused and stated that they are working with member credit unions to provide the best support. Some credit unions are reportedly considering legal action.
An FCA spokesman recognized the policyholders’ concerns and mentioned that they have engaged with all firms involved, asking credit unions to communicate clearly with their members. They clarified that they do not have the power to force firms to continue offering products after they withdraw them.
Maiden Life was contacted for comment.
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